**Why Tribune filed

The parent company of the LAT and KTLA has nearly $13 billion in debt and $7.6 billion in assets, according to a court filing. The biggest problem appears to be inadequate cash coming in. As reported by the NYT, there is a covenant on some of its debt that basically requires the company to generate a certain amount of earnings. Failure to maintain that level puts Tribune in technical default.

A CreditSights analyst, Jake Newman, wrote in a research report published last month that Tribune avoided technical default in the third quarter partially through some accounting adjustments. “We think the company will have difficulty meetings its year-end covenant compliance,” Mr. Newman wrote.

Top creditors listed in the filing include JPMorgan Chase, Merrill Lynch and Deutsche Bank. JPMorgan listed some of the firms it had syndicated its debt to as well, a list that includes private investment firms Kohlberg Kravis Roberts’s KKR Financial and Highland Capital Management.

*Tribune says in a statement that the restructuring focuses on the company's debt, not on its operations. Businesses will remain in operation throughout the restructuring. "Factors beyond our control have created a perfect storm - a precipitous decline in revenue and a tough economy coupled with a credit crisis that makes it extremely difficult to support our debt," said CEO Sam Zell. "We believe that this restructuring will bring the level of our debt in line with current economic realities, and will take pressure off our operations."

**In its filing Monday, Tribune also said that it has retained Alvarez & Marsal, a restructuring adviser that is also working with Lehman Brothers. Also, Barclays, one of the existing lenders, agreed to provide credit and financing facilities. That allows the company to keep operating during the bankruptcy process.

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
Mark Lacter, business writer and editor was 59
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